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reprinted from:
Hong Kongers get reprieve on new
taxes
By Loh Hui Yin, Hongkong Correspondent Hong Kongers breathed a collective sigh of relief when Financial Secretary Donald Tsang, contrary to strong hints, did not raise taxes, or introduce new ones, thereby enabling nascent economic growth to continue. Hong Kong's recession-hit economy grew by 2.9 per cent last year on the back of strong exports in goods and services, particularly in the last quarter. With further pick-up in the East Asian economies, Mr Tsang yesterday forecast the economy will expand by 5 per cent this year. Still, the finance chief was quick to serve notice in his budget speech, delivered yesterday, that Hong Kongers' reprieve on the much-dreaded sales tax and departure tax was temporary. To address the issue of whether a sales tax was necessary to widen Hong Kong's narrow tax base, a task force will review the tax regime's viability. In parallel, an independent committee comprising tax experts, professionals and academics will be set up to study the pros and cons of introducing new taxes. Both committees are to complete their work before the next budget in March 2001. Mr Tsang was also convinced the principle of implementing a land and sea departure tax was correct, but decided the timing was not right as it would "put an additional burden" on the community. He also warned that government fees and charges, most of which have been frozen since February 1998 as a result of the recession, will have to be revised eventually. In the run up to the budget, government officials have suggested that a sales tax and a land departure tax, targeted mainly at Hong Kongers who cross the border to Shenzhen, are on the cards. There has also been speculation that Mr Tsang might announce increases in corporate and personal income tax, road tax and driving licence fees. Thousands of Hong Kongers lined up for hours on end to renew their road tax and driving licences to beat the budget deadline. Tax partner, Mrs Jennifer Wong, of accountancy firm KPMG suggested that Mr Tsang had decided to defer the unpopular sales tax and land departure tax because they would be particularly difficult to get through the Legislative Council. Its members are up for election later in the year. Whatever few tax concessions Mr Tsang offered were mainly marginal ones, such as exemption on first-time registration tax for electric cars up till March 2003. However, he cut stamp duty on share transactions by 10 per cent to 0.225 per cent, from 0.25 per cent, a move which some analysts saw as in response to Singapore. This would cost the Hong Kong government HK$ 520 million (S$ 114.4 million) in 2000-01. Singapore, which has a lower stamp duty of 0.05 per cent, scrapped it in the Budget announced last month. In his budget, Mr Tsang proposed a government expenditure of HK$ 250 billion against revenue of HK$ 244 billion, giving rise to a HK$6 billion deficit. It would be Hong Kong's third consecutive budget deficit. For the outgoing financial year, the deficit was much smaller than expected -- thanks to a windfall from the government's investment portfolio. Instead of the forecast of HK$ 36 billion, the deficit is now HK$ 1.6 billion. Mr Tsang also disclosed steps to reduce the 198,000-strong civil service by 10,000 jobs over three years. HIGHLIGHTS Budget begins from April 1.
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